Once you graduate high school, the financial costs can add up quickly when it comes to continuing your education. Most people don't have the ability to pay for higher education out of pocket. This is where grants, scholarships, and student loans come in. We've broken down the details of each option to help you decide which option, or combination of options, is right for you.
Grants and scholarships should be the first step when looking at options to pay for school. Grants are needs-based, while scholarships are typically merit-based. Both are great options to pay for school-related expenses that you don’t have to pay back (Free money!). For more information on federal grants and scholarships that may be available to you, visit StudentAid.gov. You can also find information on grants and scholarships available through the state, here.
After grants and scholarships, student loans are the most common way to help pay for tuition, books, living arrangements, and other college expenses. There are two types of loans to consider: federal and private.
Federal loans are offered to students through the U.S. Department of Education. They're also unofficially known as Stafford Loans or Direct Stafford Loans. These loans often have lower interest rates and repayment plans that are more flexible than private loans. Rejections are also rare with federal loans.
Private loans are loans taken out through banks, credit unions, or other financial institutions. Private loans will typically have higher interest rates and their own set of conditions that must be met. In addition, approval may be more difficult due to credit score and credit history requirements.
Another aspect to consider when it comes to student loans is whether the loan is subsidized or unsubsidized. Subsidized student loans are needs-based and help you out while enrolled in school, for up to 6 months post-graduation, and anytime your loans are in deferment. During these periods, you don’t have to worry about the interest accruing; the government will take care of that. With unsubsidized loans, it is entirely your responsibility to repay the interest that accrues while you are in school.
To help you out with the differences:
| Topic | Federal | Private |
|---|---|---|
| Repayment | Must be enrolled at least half-time. Repayment doesn't start until after you graduate or withdraw, or after your enrolled credit hours decrease to less than half-time. | Repayment starts while you attend college. |
| Interest Rate | Interest rates are fixed and, for the most part, much lower than private loans. | Interest rates may be variable or higher. |
| Subsidies | The government will pay interest while you attend school. | You'll be required to pay all interest on the loan. |
| Credit Check | No credit check needed. | Credit check is required; lender may want to see an established credit history or a cosigner. |
| Consolidate and Refinancing | Loans can be consolidated. | Can’t be consolidated, but can be refinanced. |
| Repayment Plan | Several types available, including an income-based option. | Check with your lender to determine payment plan options. |
| Loan Forgiveness | May be eligible for forgiveness for public service. | Private lenders do not offer loan forgiveness. |
| Postponement | If you are having difficulty paying, you may be eligible for a temporary postponement or lowered payment. | Check with your lender to determine postponement options. |
With the rising costs of tuition, books, and housing, you may not be able to afford college on your own. However, with the information provided, you can hopefully make a more informed decision about how to proceed with your education.
For more information on student loans, please visit StudentAid.gov.